UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission File Number 1-10042
ATMOS ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
TEXAS AND VIRGINIA 75-1743247
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1800 Three Lincoln Centre
5430 LBJ Freeway, Dallas, Texas 75240
(Address of principal executive offices) (Zip Code)
(972) 934-9227
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Number of shares outstanding of each of the issuer's classes of
common stock, as of April 30, 1999.
Class Shares Outstanding
----- ------------------
No Par Value 30,868,815
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands)
March 31, September 30,
1999 1998
------------- -------------
ASSETS
Property, plant and equipment $1,495,381 $1,446,420
Less accum. depreciation and amort. 553,836 528,560
---------- ----------
Net property, plant and equipment 941,545 917,860
Current assets
Cash and cash equivalents 14,609 4,735
Accounts receivable, net 100,387 34,887
Inventories of supplies and mdse. 14,710 15,219
Gas stored underground 24,493 48,909
Prepayments 3,007 3,630
---------- ----------
Total current assets 157,206 107,380
Deferred charges and other assets 122,912 116,150
---------- ----------
$1,221,663 $1,141,390
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Shareholders' equity
Common stock $ 154 $ 152
Additional paid-in capital 283,152 271,637
Retained earnings 126,716 99,369
Treasury stock (91) -
---------- ----------
Total shareholders' equity 409,931 371,158
Long-term debt 386,640 398,548
---------- ----------
Total capitalization 796,571 769,706
Current liabilities
Current maturities of long-term debt 18,996 57,783
Notes payable 112,147 66,400
Accounts payable 71,693 44,742
Taxes payable 18,084 12,736
Customers' deposits 10,805 12,029
Other current liabilities 34,832 30,369
---------- ----------
Total current liabilities 266,557 224,059
Deferred income taxes 84,494 80,213
Deferred credits and other liabilities 74,041 67,412
---------- ----------
$1,221,663 $1,141,390
========== ==========
See accompanying notes to condensed consolidated financial
statements.
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Three months ended
March 31,
--------------------
1999 1998
-------- --------
Operating revenues $261,426 $288,550
Purchased gas cost 149,031 164,579
-------- --------
Gross profit 112,395 123,971
Operating expenses
Operation 34,312 33,227
Maintenance 1,156 2,288
Litigation settlement 3,250 -
Depreciation and amortization 13,800 11,876
Taxes, other than income 9,034 9,377
-------- --------
Total operating expenses 61,552 56,768
-------- --------
Operating income 50,843 67,203
Other income 2,355 2,241
Interest charges, net 8,166 9,336
-------- --------
Income before income taxes 45,032 60,108
Income taxes 16,237 22,710
-------- --------
Net income $ 28,795 $ 37,398
======== ========
Basic net income per share $ .95 $ 1.26
======== ========
Diluted net income per share $ .94 $ 1.25
======== ========
Cash dividends per share $ .275 $ .265
======== ========
Weighted average
shares outstanding:
Basic 30,449 29,740
======== ========
Diluted 30,698 29,965
======== ========
See accompanying notes to condensed consolidated financial
statements.
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
Six months ended
March 31,
---------------------
1999 1998
-------- --------
Operating revenues $471,653 $583,881
Purchased gas cost 268,050 360,309
-------- --------
Gross profit 203,603 223,572
Operating expenses
Operation 70,190 69,268
Maintenance 3,827 4,769
Litigation settlement 3,250 -
Depreciation and amortization 27,400 23,784
Taxes, other than income 16,405 17,596
-------- --------
Total operating expenses 121,072 115,417
-------- --------
Operating income 82,531 108,155
Other income 4,075 3,004
Interest charges, net 17,239 18,645
-------- --------
Income before income taxes 69,367 92,514
Income taxes 25,192 34,994
-------- --------
Net income $ 44,175 $ 57,520
======== ========
Basic net income per share $ 1.45 $ 1.94
======== ========
Diluted net income per share $ 1.44 $ 1.94
======== ========
Cash dividends per share $ .55 $ .53
======== ========
Weighted average
shares outstanding:
Basic 30,361 29,654
======== ========
Diluted 30,601 29,668
======== ========
See accompanying notes to condensed consolidated financial
statements.
ATMOS ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
Six months ended
March 31,
---------------------
1999 1998
-------- --------
Cash Flows From Operating Activities
Net income $44,175 $57,520
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization
Charged to depreciation and
amortization 27,400 23,784
Charged to other accounts 2,100 1,634
Deferred income taxes (benefit) 4,281 (342)
Net change in operating assets and
liabilities (4,625) 7,457
------- --------
Net cash provided by operating activities 73,331 90,053
Cash Flows From Investing Activities
Capital expenditures (51,130) (52,575)
Retirements of property, plant and
equipment (2,055) 215
-------- --------
Net cash used in investing activities (53,185) (52,360)
Cash Flows From Financing Activities
Net increase (decrease) in notes payable 45,747 (20,457)
Cash dividends paid (16,828) (15,828)
Repayment of long-term debt (50,695) (8,522)
Issuance of common stock 11,504 11,123
-------- --------
Net cash used by financing activities (10,272) (33,684)
-------- --------
Net increase in cash and cash equivalents 9,874 4,009
Cash and cash equivalents at beginning
of period 4,735 6,016
-------- --------
Cash and cash equivalents at end
of period $14,609 $10,025
======== ========
See accompanying notes to condensed consolidated financial
statements.
ATMOS ENERGY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 1999
1. Unaudited interim financial information
In the opinion of management, all material adjustments
necessary for a fair presentation have been made to the unaudited
interim period financial statements. Such adjustments consisted
only of normal recurring accruals. Because of seasonal and other
factors, the results of operations for the six month period ended
March 31, 1999 are not indicative of expected results of
operations for the year ending September 30, 1999. These interim
financial statements and notes are condensed as permitted by the
instructions to Form 10-Q, and should be read in conjunction with
the audited consolidated financial statements of Atmos Energy
Corporation ("Atmos" or the "Company") in its 1998 Annual Report
on Form 10-K. The condensed consolidated balance sheet of Atmos
as of March 31, 1999, the related condensed consolidated
statements of income for the three-month and six-month periods
ended March 31, 1999 and 1998, and the condensed consolidated
statements of cash flows for the six-month periods ended March
31, 1999 and 1998, included herein have been subjected to a
review by Ernst & Young LLP, the Company's independent
accountants, whose review report is included herein. During
fiscal 1998 and 1999 management has evaluated and restructured
the organization and operation of certain segments of the
Company. As a result, certain prior year balances have been
reclassified to be consistent with the current presentation.
Common stock - As of March 31, 1999, the Company had
100,000,000 shares of common stock, no par value (stated at $.005
per share), authorized and 30,827,841 shares outstanding. At
September 30, 1998, the Company had 30,398,319 shares
outstanding.
2. Rates
The Company's ratemaking activity over the three-year period
ended September 30, 1998 was discussed in Note 3 of notes to
consolidated financial statements in the Company's Form 10-K for
the year ended September 30, 1998. The Trans La Division has a
hearing scheduled before the Louisiana Public Service Commission
in June 1999 for the Louisiana Commission to consider the Trans
La Division's rate of return with a decision expected in August
1999. The Western Kentucky Division has informed the Kentucky
Public Service Commission of its intent to file a rate case.
3. Contingencies
For a review of the status of the Company's litigation and
environmental matters as of September 30, 1998, please refer to
Note 5 of notes to consolidated financial statements in the
Company's Form 10-K for the year ended September 30, 1998.
Material contingencies and new developments since September 30,
1998 are discussed below.
Litigation
In November 1997, a jury in Plaquemine, Louisiana awarded
Brian L. Heard General Contractor, Inc., ("Heard") a total of
$177,929 in actual damages and $15 million in punitive damages
resulting from a lawsuit by Heard against the Trans La Division,
the successor in interest to Oceana Heights Gas Company, which
the Company acquired in November 1995. The trial judge also
awarded interest on the total judgment amount. The claims are
for events that occurred prior to the time Atmos acquired Oceana
Heights Gas Company. Heard filed the suit against the Trans La
Division and two other defendants, alleging that gas leaks had
caused delays in Heard's completion of a sewer project, resulting
in lost business opportunities for the contractor during 1994.
The Company immediately appealed the verdict. However, on March
24, 1999, the Company announced that it had reached a settlement
of the case as a result of mediation discussions. The parties
agreed to settle the case for $3.5 million. In the settlement,
neither Atmos nor the Trans La Division conceded liability.
Atmos paid $3.25 million and the remaining $.25 million will be
paid by Oceana Heights Gas Company's insurers. In exchange, the
Company obtained a full release from Heard of all claims against
Atmos and the Trans La Division.
In Colorado, the Greeley Division is a defendant in several
lawsuits filed as a result of a fire in a building in Steamboat
Springs, Colorado on February 3, 1994. The plaintiffs claimed
that the fire resulted from a leak in a severed gas service line
owned by the Greeley Division. On January 12, 1996, the jury
awarded the plaintiffs approximately $2.5 million in compensatory
damages and approximately $2.5 million in punitive damages. The
jury assessed the Company with liability for all of the damages
awarded. The Company appealed the judgment to the Colorado Court
of Appeals, which reversed the trial court verdict and ordered a
new trial. The Colorado Supreme Court upheld the Court of Appeals
reversal and order for a new trial. The Company does not expect
the final outcome of this case to have a material adverse effect
on the financial condition, the results of operations or the cash
flows of the Company because the Company believes it has adequate
insurance and reserves to cover any damages that may ultimately
be awarded.
From time to time, other claims are made and lawsuits are
filed against the Company arising out of the ordinary business of
the Company. In the opinion of the Company's management,
liabilities, if any, arising from these other claims and lawsuits
are either covered by insurance, adequately reserved for by the
Company or would not have a material adverse effect on the
financial condition, results of operations, or cash flows of the
Company.
Guarantees
The Company's wholly-owned subsidiary, UCG Energy, and
Woodward Marketing, Inc. ("WMI"), sole members of Woodward
Marketing, L.L.C. ("WMLLC"), act as guarantors of up to $12.5
million of balances outstanding under a $30.0 million bank credit
facility for WMLLC. UCG Energy guarantees the payment of up to
$5.6 million of borrowings under this facility. A balance of
approximately $4.1 million was outstanding under this credit
facility at March 31, 1999. UCG Energy and WMI also act as joint
and several guarantors on certain accounts payable for gas
purchases. UCG Energy has agreed to guarantee payables of WMLLC
up to $40.0 million of natural gas purchases and transportation
services from suppliers. WMLLC payable balances outstanding that
were subject to these guarantees amounted to $10.6 million at
March 31, 1999.
Environmental Matters
Atmos is the owner or previous owner of manufactured gas
plant sites which were used to supply gas prior to availability
of natural gas. The gas manufacturing process resulted in
certain by-products and residual materials including coal tar.
The manufacturing process used by the Company was an acceptable
and satisfactory process at the time such operations were being
conducted. Under current environmental protection laws and
regulations, the Company may be responsible for response actions
with respect to such materials, if response actions are
necessary.
The United Cities Division owns or owned former manufactured
gas plant sites in Johnson City and Bristol, Tennessee, Hannibal,
Missouri, Keokuk, Iowa and Americus, Georgia. UCGC and the
Tennessee Department of Environment and Conservation entered into
a consent order effective January 23, 1997, for the purpose of
facilitating the investigation, removal and remediation of the
Johnson City site. UCGC began the implementation of the consent
order in the first quarter of 1997.
The Company is unaware of any information which suggests
that the Bristol site gives rise to a present health or
environmental risk as a result of the manufactured gas process or
that any response action will be necessary. The Tennessee
Regulatory Authority granted UCGC permission to defer, until its
next rate case, all costs incurred in Tennessee in connection
with state and federally mandated environmental control
requirements.
On July 22, 1998, Atmos entered into an Abatement Order on
Consent with the Missouri Department of Natural Resources
addressing the former manufactured gas plant located in Hannibal,
Missouri. Atmos, through its United Cities Division, agreed in
the order to perform a removal action, a subsequent site
evaluation and to reimburse the response costs incurred by the
state of Missouri in connection with the property. The removal
action was conducted and completed in August 1998 and the site
evaluation will be completed in 1999. On February 25, 1999, the
Missouri Public Service Commission issued an Order authorizing
Atmos to defer the costs associated with this site. The Order is
effective for two years.
As of March 31, 1999, the Company had incurred and deferred
for recovery $1.1 million, including $258,000 related to an
insurance recoverability study, and accrued and deferred for
recovery an additional $750,000 associated with the preliminary
survey and invasive study of the Johnson City, Hannibal and
Bristol sites.
Atmos is currently conducting an investigation pursuant to a
Consent Order between the Kansas Department of Health and
Environment and UCGC. The Order provides for the investigation,
and a possible response action, for mercury contamination at gas
pipeline sites which utilize or formerly utilized mercury meter
equipment in Kansas. As of March 31, 1999, the Company had
identified approximately 720 sites where mercury may have been
used and had incurred and deferred $100,000 for recovery. In
addition, based upon available current information, the Company
accrued and deferred for recovery an additional $280,000 for the
investigation of these sites. The Kansas Corporation Commission
has authorized the Company to defer these costs and seek recovery
in a future rate case.
The Company addresses other environmental matters from time
to time in the regular and ordinary course of its business.
Management expects that future expenditures related to response
action at any site will be recovered through rates or insurance,
or shared among other potentially responsible parties.
Therefore, the costs of responding to these sites are not
expected to materially affect the results of operations,
financial condition or cash flows of the Company.
4. Short-term debt
At March 31, 1999, the Company had committed, short-term,
unsecured bank credit facilities totaling $262.0 million, of
which $250.0 million was unused. The Company also had aggregate
uncommitted lines of credit totaling $80.0 million, of which
$69.7 million was unused.
The Company implemented a $250 million commercial paper
program in October 1998. It is supported by a $250.0 million
short-term, unsecured credit facility. The Company's commercial
paper is rated A-2 by Standard and Poor's and P-2 by Moody's. At
March 31, 1999, the Company had $89.9 million of commercial paper
outstanding.
5. Statements of cash flows
Supplemental disclosures of cash flow information for the
six-month periods ended March 31, 1999 and 1998 are presented
below.
Six months ended
March 31,
---------------------
1999 1998
------ ------
(In thousands)
Cash paid for
Interest $20,833 $18,460
Income taxes 13,374 7,399
Under the terms of the Restricted Stock Grant Plan (the
"Plan"), 3,150 shares of restricted common stock were forfeited
to the Company upon the resignation of two officers. These
shares were recorded at the average fair market value on the day
of forfeiture and are being held by the Company as treasury
shares available for reissuance under the Plan. At March 31,
1999, the Company had $91,000 recorded as treasury stock. In
connection with the forfeitures the Company removed $78,000 of
unamortized deferred compensation expense from deferred charges
and other assets and recorded the net effect of the transaction
of $13,000 in additional paid-in capital.
6. Earnings per share
In 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per
Share. Statement 128 replaced the previously reported primary
and fully diluted earnings per share with basic and diluted
earnings per share. Reconciliations of the numerators and
denominators of the basic and diluted per-share computations for
net income for the three-month and six-month periods ended March
31, 1999 and 1998 are as follows:
For the three months ended
March 31, 1999
------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
(In thousands, except per share amounts)
Basic EPS:
Income available to
common stockholders $28,795 30,449 $0.95
=====
Effect of dilutive securities:
Restricted stock - 243
Stock options - 6
------- ------
Diluted EPS:
Income available to
common stockholders and
assumed conversions $28,795 30,698 $ .94
======= ====== =====
For the three months ended
March 31, 1998
------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
(In thousands, except per share amounts)
Basic EPS:
Income available to common
stockholders $37,398 29,740 $1.26
=====
Effect of dilutive securities:
Restricted stock - 211
Stock options - 14
------- ------
Diluted EPS:
Income available to common
stockholders and assumed
conversions $37,398 29,965 $1.25
======= ====== =====
For the six months ended
March 31, 1999
------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
(In thousands, except per share amounts)
Basic EPS:
Income available to
common stockholders $44,175 30,361 $1.45
=====
Effect of dilutive securities:
Restricted stock - 234
Stock options - 6
------- ------
Diluted EPS:
Income available to
common stockholders and
assumed conversions $44,175 30,601 $1.44
======= ====== =====
For the six months ended
March 31, 1998
------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
(In thousands, except per share amounts)
Basic EPS:
Income available to common
stockholders $57,520 29,654 $1.94
=====
Effect of dilutive securities:
Restricted stock - -
Stock options - 14
------- ------
Diluted EPS:
Income available to common
stockholders and assumed
conversions $57,520 29,668 $1.94
======= ====== =====
7. Related party transactions
Atmos owns a 45% interest in Woodward Marketing, L.L.C., a
limited liability company headquartered in Houston, Texas, which
is engaged in gas marketing and energy services. Included in
purchased gas cost were purchases from WMLLC of approximately
$42.1 million and $31.9 million for the three-month periods ended
March 31, 1999 and 1998, respectively, and approximately $62.8
million and $80.0 million for the six-month periods ended March
31, 1999 and 1998, respectively.
Mr. Dan Busbee, a member of the Board of Directors as well as
the Human Resources Committee and Audit Committee, is of counsel
to the law firm of Gibson, Dunn & Crutcher in Dallas, Texas,
which the Company retains from time to time to perform legal
services. Legal fees paid to Gibson, Dunn & Crutcher of $56,000
and $61,000 for the quarter and six months ended March 31, 1999,
respectively, are included in operation expenses.
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
Atmos Energy Corporation
We have reviewed the accompanying condensed consolidated balance
sheet of Atmos Energy Corporation as of March 31, 1999, and the
related condensed consolidated statements of income and cash
flows for the three-month and six-month periods ended March 31,
1999 and 1998. These financial statements are the responsibility
of the Company's management.
We conducted our reviews in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data, and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing
standards, which will be performed for the full year with the
objective of expressing an opinion regarding the financial state
ments taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the accompanying condensed
consolidated financial statements at March 31, 1999, and for the
three-month and six-month periods ended March 31, 1999 and 1998
for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Atmos
Energy Corporation as of September 30, 1998, and the related
consolidated statements of income, shareholders' equity, and cash
flows for the year then ended (not presented herein) and in our
report dated November 10, 1998, we expressed an unqualified
opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of September 30, 1998, is fairly
stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
ERNST & YOUNG LLP
Dallas, Texas
April 29, 1999
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
The following discussion should be read in conjunction with
the condensed consolidated financial statements contained in this
Quarterly Report on Form 10-Q and Management's Discussion and
Analysis contained in the Company's 1998 Annual Report to
Shareholders and the Company's Annual Report on Form 10-K for the
year ended September 30, 1998.
The Company distributes and sells natural gas and propane to
residential, commercial, industrial and agricultural customers in
thirteen states. Such business is subject to regulation by state
and/or local authorities in each of the states in which the
Company operates. In addition, the Company's business is
affected by seasonal weather patterns, competitive factors within
the energy industry, and economic conditions in the areas that
the Company serves.
Cautionary Statement under the Private Securities Litigation
Reform Act of 1995
The matters discussed or incorporated by reference in this
Quarterly Report on Form 10-Q contain "forward-looking
statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934. All statements other than statements of
historical facts included in this Quarterly Report including, but
not limited to, those contained in the following sections, Item
2, "Management's Discussion and Analysis of Financial Condition
and Results of Operations", and Note 3 of notes to condensed
consolidated financial statements, regarding the Company's
financial position, business strategy and plans and objectives of
management of the Company for future operations, are forward-
looking statements made in good faith by the Company and are
intended to qualify for the safe harbor from liability
established by the Private Securities Litigation Reform Act of
1995. When used in this Report or in any of the Company's other
documents or oral presentations, the words "anticipate,"
"report," "objective," "forecast," "goal" or similar words are
intended to identify forward-looking statements. Such forward-
looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from those
expressed or implied in the statements relating to the Company's
operations, markets, services, rates, recovery of costs,
availability of gas supply, and other factors. These risks and
uncertainties include, but are not limited to, national, regional
and local economic competitive conditions, regulatory and
business trends and decisions, technological developments, Year
2000 issues, inflation rates, weather conditions, and other
uncertainties, all of which are difficult to predict and many of
which are beyond the control of the Company. Accordingly, while
the Company believes that the expectations reflected in the
forward-looking statements are reasonable, there can be no
assurance that such expectations will be realized or will
approximate actual results.
Ratemaking Activity
As of March 31, 1999, the Company did not have any general
rate cases currently pending. The Trans La Division has a
hearing scheduled before the Louisiana Public Service Commission
in June 1999 and the Western Kentucky Division has advised the
Kentucky Public Service Commission of its intent to file a rate
case. For additional information regarding ratemaking activity
see Note 2 under notes to condensed consolidated financial
statements.
Year 2000 issues
The Year 2000 issues arose because many computer systems and
software applications as well as embedded computer chips in plant
and equipment currently in use were constructed using an
abbreviated date field that eliminates the first two digits of
the year. On January 1, 2000, these systems, applications and
embedded computer chips may incorrectly recognize the date as
January 1, 1900. Accordingly, many computer systems and software
applications, as well as embedded chips, may incorrectly process
financial and operating information or fail to process such
information completely. The Company has been aware of these
issues and is addressing their potential effects on its computer
systems, software applications and plant and equipment.
State of readiness
In October 1996, the Company established its Year 2000
Project Team with the mission of ensuring that all critical
systems, facilities and processes are identified, analyzed for
Year 2000 readiness, corrected if necessary, and tested if
changes are necessary. The Year 2000 Project Team is headed by
an officer of the Company and consists of representatives from
all business units and shared services units of the Company. The
Company, including all of its departments and business units, has
a Year 2000 strategy in place and has begun the implementation of
the Year 2000 plan to manage and minimize risks associated with
the Year 2000 issues.
The Company has also obtained an updated assessment from an
independent consulting firm, who specializes in such matters, of
the risks posed for the Company and its business units by the
Year 2000 issues, including an assessment of its risks in each
area of the Company involving the use of computer technology and
an assessment of the business and legal risks created for the
Company by the Year 2000 issues. Such assessment also includes
the risks associated with the Company's embedded technologies
such as micro-controllers or microchips embedded in non-
information technology-related equipment. This assessment, which
will update a previous assessment the consulting firm performed
in June 1998, was completed in late April 1999.
With respect to information technology ("IT") systems, the
Company has conducted an inventory of and is continuing to
evaluate and review its application software on all platforms
such as the mainframe, local area network and personal computers.
Concerning non-IT systems, including embedded technology, the
Company has conducted an inventory of and is continuing to review
and evaluate all of its telecommunications, security access and
building control systems, forms, reports and other business
processes and activities as well as the equipment and facilities
utilized in the Company's gas distribution and storage systems.
In addition, several members of the Year 2000 Project Team have
completed training on an American Gas Association-sponsored
database relating to testing of embedded technology. This
database has helped to expedite the review and compliance efforts
related to embedded technology.
The Company's Year 2000 plan includes specific timetables
for the following categories of tasks for each of its shared
services units and business units with respect to both IT systems
and embedded technology as follows:
- Identification of Year 2000 issues--completed;
- Prioritization of Year 2000 issues--completed;
- Estimation of total Year 2000-related costs--completed;
- Testing of Year 2000 solutions--in process and to be
completed by September 30, 1999;
- Implementation of Year 2000 solutions--in process and to be
completed by September 30, 1999;
- Certification of Year 2000 readiness by third party vendors
and suppliers--in process and to be completed by September 30,
1999;
- Monitoring of all systems for changes in current systems
that would require changes in Year 2000 plan--in process and to
be completed by September 30, 1999;
- Development of Year 2000 contingency plans--gas supply
operations and other mission critical contingency plans are
substantially complete. Other non-mission critical contingency
plans are in process and should be substantially complete by June
30, 1999.
- Final Year 2000 tests--to be conducted starting September
30, 1999.
The Company is also continuing to conduct an inventory and
review of mission critical computer systems provided by outside
vendors. The Year 2000 Project Team is continuing to contact all
major vendors to coordinate their Year 2000 readiness schedules
with those of the Company. The Company is requiring vendors who
provide mission critical goods or services to submit to the
Company their readiness plans and to certify readiness in order
to continue to do business with the Company. As discussed, the
Company is also in the process of testing vendor products that
provide mission critical goods or services to ensure their Year
2000 readiness. In addition, the Company has identified its key
suppliers, including gas suppliers and gas pipelines, and is
communicating with them, including conducting on-site visits, for
the purpose of evaluating the status of their solutions to their
respective Year 2000 issues. The expected date of completion of
these procedures is September 30, 1999.
Costs to address Year 2000 issues
As of March 31, 1999, the Company had incurred a total of
approximately $350,000 in fees and expenses in connection with
its Year 2000 efforts. The Company currently expects to spend
approximately $1.0 million directly on its Year 2000 efforts by
December 31, 1999. As part of its normal systems upgrade in the
ordinary course of business, the Company is in the process of
replacing its customer information system, accounting and
financial reporting system, and human resources system with
systems that happen to be Year 2000 ready. Although these
systems, when fully installed, will be Year 2000 ready, the
replacement of these systems was not accelerated to 1999 in an
attempt to deal with the Year 2000 issues.
Risks of Year 2000 issues and contingency plans
The Company has identified what it believes are its most
reasonably likely worst case Year 2000 scenarios. These scenarios
are (i) interference with the Company's ability to receive and
deliver gas to customers; (ii) interference with the Company's
ability to communicate with customers; and (iii) the temporary
inability to send invoices to and receive payments from
customers.
The most reasonably likely worst case scenario associated
with the Year 2000 issues would be the Company's inability to
continue to transport and distribute gas to its customers without
interruption. In the event the Company and/or its suppliers and
vendors are unable to remediate critical Year 2000 issues prior
to January 1, 2000, the ability of the Company to deliver gas to
its customers without interruption could be impacted. In order
to address this worst case scenario, the Company has developed
contingency plans to continue to deliver gas primarily through
manual intervention and other procedures should it become
necessary to do so. Such procedures include back-up power supply
for its critical distribution and storage operations and, if
necessary, curtailment of supply. The Company's storage capacity
would be used to supplement system supply in the event its
suppliers or gas pipelines are unable to make deliveries.
With respect to communications with customers, which is
heavily reliant on services provided by third parties, the
Company is continuing to evaluate Year 2000 readiness by such
third parties and will continue to refine its contingency plans
to address any worst case scenarios that may be determined after
such evaluations are complete. Concerning the billing and
payment systems, as previously discussed, the Company is in the
process of replacing its customer information system, accounting
and financial reporting system, and human resources system with
systems that are Year 2000 ready, which should substantially
diminish the risk of Year 2000 issues. Nevertheless, the Company
has developed contingency plans and will continue to refine such
plans in case the billing and payment systems prove not to be
Year 2000 ready.
Despite the Company's efforts, there can be no assurance
that all material risks associated with Year 2000 issues relating
to systems within its control will have been adequately
identified and corrected before the end of 1999. However, as the
result of its Year 2000 plan and the replacement of the customer
information system, accounting and financial reporting system,
and human resources system in 1999, the Company does not believe
that in the aggregate, Year 2000 issues with respect to both its
own IT and non-IT systems will be material to its business,
operations or financial condition. On the other hand, while the
Company is in the process of researching the Year 2000 readiness
of its suppliers and vendors, the Company can make no
representations regarding the Year 2000 readiness status of
systems or parties outside its control, and currently cannot
assess the effect on it of any non-readiness by such systems or
parties.
All statements concerning Year 2000 issues other than
historical statements, including, without limitation, estimated
costs and the projected timetable of Year 2000 readiness,
constitute "forward-looking statements," as defined in the
Private Securities Litigation Reform Act of 1995. Any forward-
looking statements were made in good faith by the Company and are
intended to qualify for the safe harbor from liability
established by that Act.
Weather and Seasonality
The Company's natural gas and propane distribution
businesses are seasonal due to weather conditions in the
Company's service areas. Sales are affected by winter heating
season requirements. Sales to agricultural customers (who use
natural gas as fuel in the operation of irrigation pumps) during
the period from April through September are affected by rainfall
amounts. These factors generally result in higher operating
revenues and net income during the period from October through
March of each year and lower operating revenues and either net
losses or lower net income during the period from April through
September of each year. Weather for the six months ended March
31, 1999 was 16% warmer than normal and 13% warmer than weather
in the corresponding period of the prior year. This decreased
sales volumes to weather sensitive customers and caused net
income to decrease approximately $20.7 million or $.68 per share.
The Company has weather normalization adjustments ("WNAs") in
Georgia and Tennessee, where it serves approximately 170,000
customers or approximately 17% of the Company's total customers
and revenues. The WNAs increase the base rate when weather is
warmer than normal and decrease it when weather is colder than
normal. The effect of the WNAs was to increase revenues
approximately $4.4 million for the six months ended March 31,
1999, as compared with an increase of approximately $.6 million
for the six months ended March 31, 1998. The Company does not
have WNAs in its other service areas.
FINANCIAL CONDITION
For the six months ended March 31, 1999 net cash provided by
operating activities totaled $73.3 million compared with $90.1
million for the six months ended March 31, 1998. Net income
decreased $13.3 million to $44.2 million for the six months ended
March 31, 1999 from $57.5 million for the six months ended March
31, 1998. Depreciation and amortization increased $4.1 million
in 1999 because of utility property additions placed in service
during the past year. Net operating assets and liabilities
increased $4.6 million for the six months ended March 31, 1999
compared with a decrease of $7.5 million for the six months ended
March 31, 1998. This increase in net operating assets and
liabilities resulted primarily from large fluctuations in
accounts receivable, accounts payable and inventories of gas in
underground storage that occur when entering and leaving the
winter or heating season.
Major cash flows used in investing activities for the six
months ended March 31, 1999 included capital expenditures of
$51.1 million compared with $52.6 million for the six months
ended March 31, 1998. The capital expenditures budget for fiscal
1999 is currently $86.8 million, including $7.9 million for
completing the Customer Service Initiative ("CSI"), as compared
with actual capital expenditures of $135.0 million in fiscal
1998. Other budgeted capital projects include major expenditures
for mains, services, meters, vehicles and computer software and
equipment. The CSI project includes a new Customer Information
System, a call center, and related business process and
infrastructure changes which are planned to be placed in
operation by September 1999. These expenditures will be financed
from internally generated funds and financing activities.
For the six months ended March 31, 1999, cash flows used by
financing activities amounted to $10.3 million as compared with
cash flows used by financing activities of $33.7 million for the
six months ended March 31, 1998. During the six month period,
notes payable increased $45.7 million, as compared with a
decrease of $20.5 million in the six months ended March 31, 1998,
due to seasonal factors, project costs of CSI and the
implementation of Oracle financials. Payments of long-term debt
totaled $50.7 million for the six months ended March 31, 1999, as
compared with $8.5 million for the six months ended March 31,
1998. The Company paid $16.8 million in cash dividends during
the six months ended March 31, 1999, compared with dividends of
$15.8 million paid during the six months ended March 31, 1998.
This reflects increases in the quarterly dividend rate and in the
number of shares outstanding. In the six months ended March 31,
1999, the Company issued 429,522 shares of common stock. The
following table presents the number of shares issued under the
various plans for the six-month periods ended March 31, 1999 and
1998.
Six months ended
March 31,
---------------------
1999 1998
-------- --------
Shares issued:
Restricted Stock Grant Plan 56,850 111,250
Employee Stock Ownership Plan 21,291 25,815
Direct Stock Purchase Plan 349,307 221,786
Outside Directors Stock-for-Fee Plan 824 1,148
United Cities Long-term Stock Plan 1,250 54,000
------- -------
Total shares issued 429,522 413,999
======= =======
The Company believes that internally generated funds, its
short-term credit facilities, commercial paper program and access
to the debt and equity capital markets will provide necessary
working capital and liquidity for capital expenditures and other
cash needs for the remainder of fiscal 1999. At March 31, 1999
the Company had $262.0 million in committed short-term credit
facilities, $250.0 million of which was unused. The committed
lines of credit are renewed or renegotiated at least annually.
At March 31, 1999, the Company also had $80.0 million of
uncommitted short-term lines of credit, of which $69.7 million
was unused. At March 31, 1999, the Company had $89.9 million
outstanding under the $250.0 million commercial paper program.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999, COMPARED WITH THREE MONTHS
ENDED MARCH 31, 1998
Operating revenues decreased by 9% to $261.4 million for the
three months ended March 31, 1999 from $288.6 million for the
three months ended March 31, 1998. The most significant factor
contributing to the decrease in operating revenues was a 4%
decrease in total throughput. During the quarter ended March 31,
1999, temperatures were 4% warmer than in the corresponding
quarter of the prior year, and were 17% warmer than the 30-year
normal weather for the quarter. The total volume of gas sold and
transported for the three months ended March 31, 1999 was 71.5
billion cubic feet ("Bcf") compared with 74.2 Bcf for the three
months ended March 31, 1998. Sales volumes to weather sensitive
customer classes were lower for the quarter ended March 31, 1999
than for the corresponding period of the prior year due to the
warmer weather. Sales volumes to industrial (including
agricultural) customers were almost unchanged. The average sales
price per Mcf sold decreased $.14 to $4.35 primarily due to a
decrease in the average cost of gas. The average cost of gas per
Mcf sold decreased 4% to $2.65 for the three months ended March
31, 1999 from $2.77 for the three months ended March 31, 1998 due
to increased supply availability in the current market. Changes
in cost of gas do not directly affect gross profit.
Gross profit decreased by 9% to $112.4 million for the three
months ended March 31, 1999, from $124.0 million for the three
months ended March 31, 1998. The decrease in gross profit was
primarily due to the decrease in volumes sold to weather
sensitive customers. Also, transportation revenues decreased due
to lower average transportation revenue per Mcf.
Operating expenses increased 8% to $61.6 million for the
three months ended March 31, 1999 from $56.8 million for the
three months ended March 31, 1998. The major factors
contributing to the increase were the $3.25 million litigation
settlement and a $1.9 million increase in depreciation and
amortization. The decrease in taxes other than income taxes was
related to taxes on decreased revenues and payroll taxes related
to the reduced labor force. Operating income decreased 24% for
the three months ended March 31, 1999 to $50.8 million from $67.2
million for the three months ended March 31, 1998. The decrease
in operating income resulted from decreased operating revenues
due to warmer weather and increased operating expenses, as
mentioned above. Income taxes decreased $6.5 million in the
quarter ended March 31, 1999 compared with the corresponding
quarter of the prior year due primarily to decreased pre-tax
income.
Other income increased $.1 million for the three months
ended March 31, 1999 compared with the three months ended March
31, 1998 primarily due to an increase in the earnings from the
Company's 45 percent interest in Woodward Marketing LLC.
Propane statistics for the three months ended March 31, 1999
and 1998 are in the "Consolidated Operating Statistics" table
which appears at the end of Management's Discussion and Analysis.
The propane operations sold 10.6 million gallons of propane for
the three months ended March 31, 1999, as compared with 9.1
million gallons for the three months ended March 31, 1998. The
decrease of $1.3 million in propane revenues for the three months
ended March 31, 1999 compared with the same period last year was
the result of a lower average sales price due to comparatively
lower cost of supply. Propane customers at March 31, 1999
increased 9,679, or 33%, as compared with March 31, 1998.
Interest expense decreased $1.2 million, or 13%, for the
three months ended March 31, 1999 compared with the three months
ended March 31, 1998 due primarily to approximately $1.8 million
of interest capitalized in connection with the Customer Service
Initiative in process. Net income decreased for the three months
ended March 31, 1999 by $8.6 million to $28.8 million from $37.4
million for the three months ended March 31, 1998. This decrease
in net income resulted primarily from the decrease in sales
volumes discussed above.
SIX MONTHS ENDED MARCH 31, 1999, COMPARED WITH SIX MONTHS ENDED
MARCH 31, 1998
Operating revenues decreased by 19% to $471.7 million for
the six months ended March 31, 1999 from $583.9 million for the
six months ended March 31, 1998. The primary factors
contributing to the lower operating revenues were 13% warmer
winter weather and a 9% decrease in the average gas sales revenue
per Mcf. The lower sales price reflects a 16% decrease in the
average cost of gas per Mcf sold, which is passed through to the
customer and does not affect gross profit. Total volumes
delivered decreased 12.0 Bcf or 9% for the six months ended March
31, 1999. However, the volume transported increased 0.6 Bcf
compared with the six months ended March 31, 1998. Sales volumes
decreased 12.6 Bcf for the six months ended March 31, 1999
compared with the corresponding period of the prior year due to
warmer weather. Sales revenues to industrial (including
agricultural) customers were reduced $19.7 million by lower sales
volumes and prices. Weather in the Company's service areas was
13% warmer than weather in the corresponding six-month period of
the prior fiscal year, and 16% warmer than 30-year normal
weather. The average sales price per Mcf decreased to $4.52 for
the six months ended March 31, 1999 from $4.95 for the six months
ended March 31, 1998. The decrease in the average sales price
reflects a decrease in the average cost of gas. The average cost
of gas per Mcf sold decreased to $2.76 for the six months ended
March 31, 1999 from $3.28 for the six months ended March 31, 1998
because of generally lower gas supply costs. The decreased cost
of gas did not directly affect gross profit.
Gross profit decreased 9% to $203.6 million for the six
months ended March 31, 1999, compared with $223.6 million for the
six months ended March 31, 1998. This decrease was primarily due
to warmer weather. The Company estimates that the impact of the
weather being 16% warmer than normal for the six months ended
March 31, 1999 caused gross profit to be approximately $32.6
million less than it would have been had the Company experienced
normal temperatures and rainfall in its respective service areas.
Weather was approximately 4% warmer than normal for the six
months ended March 31, 1998.
Operating expenses increased to $121.1 million in the six
months ended March 31, 1999, from $115.4 million in the six
months ended March 31, 1998. The increase was primarily due to
the $3.25 million litigation settlement and an increase of $3.6
million in depreciation and amortization. The increase in
depreciation related to utility plant additions placed in service
during the past year. Significant factors in the decrease in
taxes other than income taxes were lower taxes on decreased
revenues and payroll taxes related to the reduced labor force.
Operating income decreased for the six months ended March
31, 1999 to $82.5 million from $108.2 million for the six months
ended March 31, 1998. The decrease in operating income was
primarily related to the decreased operating revenues and, to a
lesser extent, to increased operating expenses, as discussed
above.
Other income increased $1.1 million for the six months ended
March 31, 1999 compared with the six months ended March 31, 1998
primarily due to an increase in the earnings from the Company's
45 percent interest in Woodward Marketing LLC.
The propane operations sold 16.7 million gallons of propane
for the six months ended March 31, 1999, as compared with 17.4
million gallons for the six months ended March 31, 1998. The
decrease of $4.5 million in propane revenues for the six months
ended March 31, 1999 compared with the same period last year was
the result of a combination of factors including 8% warmer
weather and a lower average sales price due to comparatively
lower cost of supply.
Interest charges decreased $1.4 million, or 8%, due to
increased capitalized interest on the CSI project for the six
months ended March 31, 1999 compared with the corresponding six-
month period of the prior year. The provision for income taxes
for the six months ended March 31, 1999 decreased $9.8 million
from the provision for the corresponding period of the prior year
due to decreased pre-tax income. Net income decreased 23% for
the six months ended March 31, 1999, to $44.2 million from $57.5
million for the six months ended March 31, 1998. The decrease in
net income resulted primarily from the decrease in operating
revenues which resulted from 13% warmer weather in fiscal 1999.
Dividends per share increased approximately 4% to $.55 for the
six months ended March 31, 1999. Diluted average shares
outstanding increased 3% due to shares issued under the Employee
Stock Ownership Plan and the Direct Stock Purchase Plan.
Total natural gas meters and propane customers at March 31,
1999 increased 24,850, or 2.4%, compared with March 31, 1998.
March 31,
-----------------------
1999 1998
--------- ---------
METERS IN SERVICE, end of period
Residential 906,945 892,069
Commercial 95,724 96,430
Public authority and other 6,553 4,874
Industrial (including agricultural) 16,155 16,833
--------- ---------
Total meters 1,025,377 1,010,206
Propane customers 38,908 29,229
--------- ---------
Total 1,064,285 1,039,435
========= =========
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
Three months ended March 31,
1999 1998
Sales volumes -- MMcf(1) -------- --------
Residential 31,378 33,404
Commercial 13,069 14,903
Public authority and other 2,275 2,183
Industrial (including agricultural) 6,439 6,453
------- ------
Total 53,161 56,943
Transportation volumes -- MMcf(1) 15,265 14,748
------- ------
Total utility volumes 68,426 71,691
Storage/energy services volumes 3,053 2,532
------- ------
TOTAL THROUGHPUT - MMcf (1) 71,479 74,223
======= ======
Propane - Gallons (000's) 10,568 9,113
OPERATING REVENUES (000's) ======= ======
Gas sales revenues
Residential $145,845 $155,456
Commercial 56,377 66,865
Public authority and other 7,903 6,656
Industrial (including agricultural) 21,464 26,294
-------- --------
Total gas sales revenues 231,589 255,271
Transportation revenues 5,645 6,420
Other gas revenues 1,495 3,613
-------- --------
Total utility revenues 238,729 265,304
Non-utility revenues
Propane revenues 10,026 11,375
Storage/energy services revenues 12,671 11,871
-------- --------
Total non-utility revenues 22,697 23,246
-------- --------
Total operating revenues $261,426 $288,550
======== ========
Average gas sales revenues per Mcf $ 4.35 $ 4.49
Average transportation revenue per Mcf $ .37 $ .44
Cost of gas per Mcf sold $ 2.65 $ 2.77
HEATING DEGREE DAYS
Weather Sensitive Three months ended March 31,
Service Area Customers % 1999 1998 Normal
- ---------------- ----------- ----- ----- ------
Energas 29% 1,517 1,762 1,884
Trans La 8% 707 855 1,068
Western Kentucky 18% 1,981 1,796 2,355
Greeley Gas 20% 2,351 2,570 2,825
United Cities 25% 1,816 1,718 2,052
----
System Average 100% 1,758 1,831 2,114
(1) Volumes are reported as metered in million cubic feet
("MMcf").
ATMOS ENERGY CORPORATION
CONSOLIDATED OPERATING STATISTICS
Six months ended March 31,
1999 1998
Sales volumes -- MMcf(1) -------- --------
Residential 52,493 59,871
Commercial 23,195 27,452
Public authority and other 4,468 4,066
Industrial (including agricultural) 12,344 13,473
-------- -------
Total 92,500 104,862
Transportation volumes -- MMcf(1) 29,703 29,089
-------- -------
Total utility volumes 122,203 133,951
Storage/energy services volumes 4,588 4,846
-------- -------
TOTAL THROUGHPUT - MMcf (1) 126,791 138,797
======== =======
Propane - Gallons (000's) 16,706 17,425
OPERATING REVENUES (000's) ======== =======
Gas sales revenues
Residential $257,056 $310,566
Commercial 103,670 136,082
Public authority and other 17,021 15,606
Industrial (including agricultural) 42,366 58,456
-------- --------
Total gas sales revenues 420,113 520,710
Transportation revenues 12,450 13,255
Other gas revenues 2,703 5,456
-------- --------
Total utility revenues 435,266 539,421
Non-utility revenues
Propane revenues 17,321 21,818
Storage/energy services revenues 19,066 22,642
-------- --------
Total non-utility revenues 36,387 44,460
-------- --------
Total operating revenues $471,653 $583,881
======== ========
Average gas sales revenues per Mcf $ 4.52 $ 4.95
Average transportation revenue per Mcf $ .42 $ .46
Cost of gas per Mcf sold $ 2.76 $ 3.28
HEATING DEGREE DAYS
Weather Sensitive Six months ended March 31,
Service Area Customers % 1999 1998 Normal
- ---------------- ----------- ----- ----- ------
Energas 29% 2,749 3,394 3,286
Trans La 8% 1,237 1,651 1,729
Western Kentucky 18% 3,281 3,509 3,968
Greeley Gas 20% 4,250 4,727 4,958
United Cities 25% 2,947 3,283 3,472
----
System Average 100% 3,042 3,486 3,631
(1) Volumes are reported as metered in million cubic feet ("MMcf").
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
All of the Company's long-term debt is fixed-rate and, therefore,
does not expose the Company to the risk of earnings or cash flow
loss due to changes in market interest rates. At March 31, 1999,
the Company is not engaged in other contracts which would cause
exposure to the risk of material earnings or cash flow loss due
to changes in market commodity prices, foreign currency exchange
rates, or interest rates.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 3 of notes to consolidated financial statements herein
for a description of legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of Atmos Energy Corporation
on February 10, 1999, 27,178,099 votes were cast as follows:
VOTES VOTES
FOR WITHHELD
---------- --------
Class I Directors:
Travis W. Bain II 26,900,241 277,858
Dan Busbee 26,907,289 270,810
Gene C. Koonce 26,922,712 255,387
Vincent J. Lewis 26,935,853 242,246
The other directors will continue to serve until the expiration
of their terms. The term of the Class II directors, Richard W.
Cardin, Thomas C. Meredith, Carl S. Quinn and Richard Ware II
will expire in 2000. The term of the Class III directors, Robert
W. Best, Thomas J. Garland, Phillip E. Nichols and Charles K.
Vaughan, will expire in 2001. The term of the Class I directors,
listed above, will expire in 2002.
Proposal to increase the total number of authorized shares that
may be issued from 75,000,000 to 100,000,000 shares:
VOTES VOTES VOTES BROKER
FOR AGAINST ABSTAINING NON-VOTE
25,163,516 1,671,070 343,513 -
Proposal to approve the 1998 Long-Term Incentive Plan:
VOTES VOTES VOTES BROKER
FOR AGAINST ABSTAINING NON-VOTE
17,998,766 5,014,779 568,810 3,595,744
Proposal to approve the Annual Incentive Plan for Management:
VOTES VOTES VOTES BROKER
FOR AGAINST ABSTAINING NON-VOTE
20,396,197 2,504,013 682,145 3,595,744
Proposal to approve the Equity Incentive and Deferred
Compensation Plan for Non-Employee Directors:
VOTES VOTES VOTES BROKER
FOR AGAINST ABSTAINING NON-VOTE
21,221,150 1,724,201 637,004 3,595,744
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
A list of exhibits required by Item 601 of Regulation S-K
and filed as part of this report is set forth in the
Exhibits Index, which immediately precedes such exhibits.
(b) Reports on Form 8-K
The Company filed a Form 8-K Current Report, Item 5, Other
Events, dated March 24, 1999, announcing that it had settled
all claims in the case of Brian L. Heard General Contractor
v. Trans Louisiana Gas Company, a division of Atmos Energy
Corporation.
Under Item 7, Financial Statements and Exhibits, an exhibit
was attached: a copy of a related press release dated March
24, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ATMOS ENERGY CORPORATION
(Registrant)
Date: May 13, 1999 By: /s/ DONALD P. BURMAN
------------------------------
Donald P. Burman
Assistant Controller
(Chief Accounting Officer and
duly authorized signatory)
EXHIBITS INDEX
Item 6(a)
Exhibit Page
Number Description Number
- ------- ----------- -------
3a Articles of Amendment to the Restated
Articles of Incorporation of Atmos Energy
Corporation as Amended (Texas)
3b Articles of Amendment to the Restated
Articles of Incorporation of Atmos Energy
Corporation as Amended (Virginia)
15 Letter regarding unaudited interim
financial information
27 Financial Data Schedule for Atmos Energy
Corporation for the six months ended
March 31, 1999
EXHIBIT 15
----------
Board of Directors
Atmos Energy Corporation
We are aware of the incorporation by reference in the Registra-
tion Statements (Form S-3 No. 33-37869, Form S-3 No. 33-70212,
Form S-3 D/A No. 33-58220, Form S-3 No. 33-56915, Form S-3/A No.
333-03339, Form S-3/A No. 333-32475, Form S-3/A No. 333-50477,
Form S-4 No. 333-13429, Form S-8 No. 33-57687, Form S-8 No. 33-
68852, Form S-8 No. 33-57695, Form S-8 No. 333-32343, Form S-8
No. 333-46337, Form S-8 No. 333-73143, and Form S-8 No. 333-
73145) of Atmos Energy Corporation of our report dated April 29,
1999, relating to the unaudited condensed consolidated interim
financial statements of Atmos Energy Corporation which are includ-
ed in its Form 10-Q for the quarter ended March 31, 1999.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report
is not a part of the registration statement prepared or certified
by accountants within the meaning of Section 7 or 11 of the
Securities Act of 1933.
ERNST & YOUNG LLP
May 13, 1999
Dallas, Texas
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF ATMOS ENERGY CORPORATION
FOR THE SIX MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> MAR-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 941,545
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 157,206
<TOTAL-DEFERRED-CHARGES> 122,912
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,221,663
<COMMON> 154
<CAPITAL-SURPLUS-PAID-IN> 283,061
<RETAINED-EARNINGS> 126,716
<TOTAL-COMMON-STOCKHOLDERS-EQ> 409,931
0
0
<LONG-TERM-DEBT-NET> 386,640
<SHORT-TERM-NOTES> 22,293
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 89,854
<LONG-TERM-DEBT-CURRENT-PORT> 18,996
0
<CAPITAL-LEASE-OBLIGATIONS> 3,281
<LEASES-CURRENT> 407
<OTHER-ITEMS-CAPITAL-AND-LIAB> 290,261
<TOT-CAPITALIZATION-AND-LIAB> 1,221,663
<GROSS-OPERATING-REVENUE> 471,653
<INCOME-TAX-EXPENSE> 25,192
<OTHER-OPERATING-EXPENSES> 389,122
<TOTAL-OPERATING-EXPENSES> 414,314
<OPERATING-INCOME-LOSS> 57,339
<OTHER-INCOME-NET> 4,075
<INCOME-BEFORE-INTEREST-EXPEN> 61,414
<TOTAL-INTEREST-EXPENSE> 17,239
<NET-INCOME> 44,175
0
<EARNINGS-AVAILABLE-FOR-COMM> 44,175
<COMMON-STOCK-DIVIDENDS> 16,828
<TOTAL-INTEREST-ON-BONDS> 5,907
<CASH-FLOW-OPERATIONS> 73,331
<EPS-PRIMARY> 1.45
<EPS-DILUTED> 1.44
</TABLE>
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
ATMOS ENERGY CORPORATION
AS AMENDED
Pursuant to the provisions of Article 4.04 of the Texas
Business Corporation Act, the undersigned corporation (hereinafter
referred to as the "Corporation") adopts the following Articles of
Amendment to its Restated Articles of Incorporation as Amended,
which increase the number of authorized shares of the common stock
of the Corporation.
ARTICLE ONE
The name of the Corporation is Atmos Energy Corporation.
ARTICLE TWO
The following amendment to the Restated Articles of
Incorporation as Amended was adopted by the shareholders of the
Corporation on February 10, 1999:
Section 1 of Article VII of the Restated Articles of
Incorporation as Amended be amended to read as follows:
"The aggregate number of shares which the
Corporation shall have the authority to issue is One
Hundred Million (100,000,000) shares of Common Stock
having no par value."
ARTICLE THREE
The number of shares of the Corporation outstanding as of the
record date was 30,610,922 and the number of shares entitled to
vote on the amendment was 30,610,922.
ARTICLE FOUR
The number of shares voting for the amendment to increase the
number of authorized shares of common stock of the Corporation was
25,163,516, the number of shares voting against such amendment was
1,671,070, and the number of shares abstaining was 343,513.
DATED: February 10, 1999.
ATMOS ENERGY CORPORATION
By:_________________________________
Robert W. Best
Chairman of the Board, President
and Chief Executive Officer
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
ATMOS ENERGY CORPORATION
AS AMENDED
Pursuant to the provisions of Article 11 of Chapter 9 of the
Virginia Stock Corporation Act, the undersigned corporation
(hereinafter referred to as the "Corporation") adopts the following
Articles of Amendment to its Restated Articles of Incorporation as
Amended, which increase the number of authorized shares of the
common stock of the Corporation.
ARTICLE ONE
The name of the Corporation is Atmos Energy Corporation.
ARTICLE TWO
After being proposed by the Board of Directors of the
Corporation and submitted to the shareholders in accordance with
Chapter 9 of the Virginia Stock Corporation Act, the following
amendment to the Restated Articles of Incorporation as Amended was
adopted by the shareholders of the Corporation on February 10,
1999:
Section 1 of Article VII of the Restated Articles of
Incorporation as Amended be amended to read as follows:
"The aggregate number of shares which the
Corporation shall have the authority to issue is One
Hundred Million (100,000,000) shares of Common Stock
having no par value."
ARTICLE THREE
The number of shares of the Corporation outstanding as of the
record date was 30,610,922 and the number of shares entitled to
vote on the amendment was 30,610,922.
ARTICLE FOUR
The number of shares voting for the amendment to increase the
number of authorized shares of common stock of the Corporation was
25,163,516, the number of shares voting against such amendment was
1,671,070, and the number of shares abstaining was 343,513.
DATED: February 10, 1999.
ATMOS ENERGY CORPORATION
By:__________________________________
Robert W. Best
Chairman of the Board, President
and Chief Executive Officer
